Ørsted Announces Billion-Dollar Impairments For U.S. Wind Portfolio - Share Price Slumps

Fredericia, Denmark - Ørsted warned last week of possible impairments on its U.S. wind portfolio worth billions of dollars. After all seemed to be fine at the company's Capital Markets Day in June, the announcement caught investors cold. The share price plummets.

Ørsted has evaluated its short-term U.S. offshore development projects prior to the final investment decision (FID) as part of a review and warns against this background of possible value adjustments worth billions. The Danish energy company and offshore specialist cites ongoing supply chain disruptions, lack of progress in negotiating investment tax credits (ITC), and the impact of increased interest rates affecting its U.S. portfolio as factors weighing on the company.

Ørsted considers impairments of up to DKK 16 billion possible

The Ocean Wind 1, Sunrise Wind and Revolution Wind projects are affected by a number of delays with suppliers. Ørsted has concluded that the ability of these suppliers to meet their commitments and contracted schedules is increasingly at risk. The resulting impact could result in impairment charges of up to DKK 5 billion (approximately EUR 670 million), assuming no further adverse developments in the supply chains on these projects.

In addition, discussions with senior federal stakeholders regarding additional ITC qualification for Ocean Wind 1 and Sunrise Wind are not progressing as expected by Ørsted. If the talks prove unsuccessful, this could result in impairments of up to DKK 6 billion (approximately EUR 800 million).

Furthermore, long-term interest rates in the U.S. have increased, affecting U.S. offshore projects and certain onshore projects. If interest rates remain at current levels until the end of the third quarter, this will result in impairment charges of approximately DKK 5 billion (approximately EUR 670 billion), the energy group said.

In total, this results in possible impairment losses of up to DKK 16 billion (just under EUR 2.2 billion).

Ørsted continues to push ahead with projects

Despite the current difficulties, Ørsted plans to continue moving forward with offshore wind projects in the United States. This includes obtaining final federal and local approvals, working with suppliers to mitigate delays, and continuing dialogue with stakeholders to try to maximize tax credits for all projects. Ørsted will work toward getting FID for the Ocean Wind 1, Sunrise Wind and Revolution Wind projects toward the end of 2023 or early 2024, the company points out.

Share plummets

On the stock market, the Ørsted announcement did not go down well with investors last week. The share slumped by 19.4 percent on a weekly basis to 60.22 euros (01.09.2023, closing price, Stuttgart Stock Exchange). On the first two trading days of the new week, too, the share continued to decline and yesterday evening traded with a minus of 11.7 percent at a price of 53.16 euros (05.09.2023, closing price, Stuttgart Stock Exchange).

Analyst Deepa Venkateswaran assessed the impairment charges under consideration as clearly negative, as the statements on the impact of the supply chain issue were new. From the perspective of Jefferies analyst Ahmed Farman, it is not yet clear whether the sum quoted by Ørsted reflects the worst-case scenario.

Source: IWR Online, Sep 09 2023